Consider a 5-year, $1000 bond, with 7% coupon rate making semiannual coupon payment. The yield curve is flat at YTM=6%.

1. What is the price of the bond?

2. What is the duration of the bond?

3. Use the duration rule to calculate the change in price when interest rates go up by 3% (300 bps). Use the following information to answer three question

Expert Solution

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Price= 1042.65

Duration= 4.32

Change= -131.22

jeff jeffy answered 2 years ago

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